Sept 15th – BOE Steals the limelight: By Greg Matwejev

Last night was suppose to be all about US CPI but across the Atlantic the BoE came to the party wearing a shorter dress. The BoE left rates unchanged at 0.25% as expected but warned that withdrawal of stimulus would be required soon… coming months !  The market took the message seriously . UK 10yr Gilts rose 9bps to 1.3% and the market priced in a 50% chance of a rate hike (up from 10%) at the Nov meeting and a 80% chance priced now by the Dec 14th meeting ( up from 36%). Sterling popped 2 big figs to 1.3400.  Even though US CPI did beat expectations the BoE shift and Sterling move was far more sexier and capped any meaningful USD rally.

Sterling is at a very important tech level when looking at the weekly chart below. Price has overshot the bolli bands and now hitting the 100 WMA @ 1.3400.  Its worth noting price has not been above this since Sept 2014. Price is also at the top of the trend channel its been trading in the last 12 months. Price is also at  back at range highs going back to July 2016 where its sold off aggressively to make the 1.1825 lows. The psychological 1.3500 level also hovers above. In a nut shell price is hitting some very solid resistance. In the short term at least it should put a brake on the rally . But as the ECB and BOC hawkish shifts and rate rises have shown .. following these CB moves have been the most profitable trades in the currency space. So the trade isnt trying to fade this level for peanuts. Take the girl with the short skirt on a proper date and watch the fireworks ! A break of 1.3500 and its blue skies for the date all the way up to 1.4000 where you can pop the champagne ! Buy the dip .

By | September 15, 2017

Source: FXCharts

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